Meet the Shadow Fed Chair

The Treasury is America's backup central bank, and we'll be looking at more BRRR during the next Fed appointment.

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Dear Fellow Traveler,

Have you heard the story about the "Shadow Fed Chair?"

It’s exactly what it sounds like…

Someone playing central banker without the fancy title or those boring congressional hearings.

Think of it as monetary policy's version of a speakeasy.

It’s technically not supposed to exist, but everyone knows where to find it.

Here's how this works…

What Is This?

The Fed is supposed to control the money supply like a lifeguard controls who gets in the pool.

But what happens when the President wants a pool party and the Federal Reserve says, "No swimming, Donny"?

You find another hose.

Enter the Treasury Department, stage left, carrying buckets labeled "T-bills."

When neither Biden nor Trump could get Jerome Powell to cut rates fast enough, the Treasury started flooding the system with short-term debt.

Can’t use the public pool? Just build a water park next door.

While the Fed is playing tough with interest rates, the Treasury is in the back alley, dealing liquid cash to anyone with a pulse.

Banks, hedge funds, and your mother if she has a brokerage account.

Everyone gets a taste of that sweet, sweet liquidity.

Here’s how it works…

1. The government issues T-bills

2. Banks buy them with reserves

3. Banks now have super-safe collateral

4. They leverage it up and lend like it's 2007

5. The Money Printer goes BRRR without the Fed touching a button.

This has been happening in broad daylight for years.

It really ramped up when Janet Yellen ran the Treasury Department.

Time to Make It Official

President Trump doesn’t like Jerome Powell.

The feeling for Powell is mutual.

It’s clear that Powell won’t be back when his term ends in 2026.

He’ll probably get a job with PIMCO, a guest lecture series at Georgetown, and a book deal where his arms are crossed on the cover and he talks about how brave he was…

You know… like every other Fed Chair before him…

Trump’s already shopping for a new Fed Chair like an interior designer shops for throw pillows - looking for something that matches his vision and won't clash with the furniture.

The name Kevin Warsh keeps popping up as the front-runner…

Trump wants rates cut by a full percentage point.

In a world where we're already printing $5.2 billion daily just to keep the lights on, we’re talking about really ripping over the floodgates.

This is like curing a hangover with more tequila.

What You Need to Do

Remember, the Treasury will keep playing with policy whether the Fed likes it or not.

And when you have two agencies racing to see who can inject more liquidity, prices don't stay calm for long.

As a result, asset prices will do fine. Stocks, real estate, bitcoin - when there's this much money sloshing around, it has to go somewhere. But all the while, look for ongoing debasement of the dollar.

Stop fighting this. Seriously.

You're not going to win a battle against two money printers running simultaneously.

Instead:

• Buy hard assets. They can't be printed.

• Short the dollar intelligently. Look to other currencies, commodities, whatever isn't made in Washington.

• Follow the liquidity. As money flows, you flow with it.

• Avoid long-term fixed income. This isn’t complicated.

BRRR.

Stay positive,

Garrett Baldwin

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The Receipts: Bloomberg, Goldman Sachs, James Bianco, Treasury Data

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